Egypt's private sector is cutting jobs faster than it has in nearly six years, new data shows. This comes despite the country's official unemployment rate hitting a record low of six percent earlier this year.
Companies shed workers at their quickest pace since June 2020 in May, according to the S&P Global Egypt Purchasing Managers' Index. Soaring operating costs and the Middle East conflict are squeezing business margins and dampening activity across the economy.
The jobless rate fell to six percent in the first quarter, the Central Agency for Public Mobilization and Statistics reported. It marks the lowest unemployment figure Egypt has recorded on official records.
The two trends tell a puzzling story. Egypt's non-oil private sector faces mounting pressure from rising input costs, weak demand, and supply chain disruptions.
David Owen is principal economist at S&P Global Market Intelligence. He noted that job cuts accelerated sharply in May, with firms both laying off workers and refusing to fill open positions.
"The sustained fall in business activity, combined with intensifying cost pressures, was starting to have a heavy impact on firms' labour requirements," Owen told reporters. Companies are clearly struggling with their staffing decisions.
Middle East tensions are now filtering through to Egypt's broader economy, the PMI survey revealed. Owen warned that slower economic growth likely lies ahead in coming months.
"The Middle East conflict is likely to depress GDP growth in the second quarter," he said. Yet businesses remain hopeful about their long-term prospects, he added.
Egypt's PMI edged up to 47.1 in May from 46.6 in April. Still, it remained well below the 50-point mark that signals economic expansion.
For the fifth consecutive month, the index stayed in contraction territory. A reading above 50 means business conditions are improving; below 50 signals decline.
New orders shrank for the fifth straight month as customers held back spending. Elevated inflation continues to discourage purchases across the economy.
Output fell sharply during the month, though the pace of decline slowed somewhat from April. Wholesale, retail, and services sectors recorded the steepest drops.
Manufacturing and construction managed modest recoveries after earlier downturns. But overall, the picture remains weak across most sectors.
Cost pressures intensified significantly during May, the survey found. Nearly half of firms reported higher input costs tied to diesel, electricity, currency weakness, and wage pressures.
Wage inflation accelerated to its fastest pace since January 2018. Workers are demanding higher pay as living costs climb.
Businesses responded aggressively by raising prices on customers, Owen noted. Output price inflation reached its second-highest level in the survey's entire history.
Companies passed along the cost burden rather than absorb it themselves. Consumers are now bearing the weight of Egypt's economic pressures.
